For all people the question was always important: "How to save and increase money?". If a person wants to earn as much as possible in order to secure a future for himself and his children, then an answer to this question must be sought. And then one day such a seeking person stumbles upon the word "investment". It is this method that promises to increase their monetary savings. But what to do with it? What is investing?
Instruments
Investing is an investment for profit. There are quite a few different tools to make this happen. What it is? Tools for a process such as investing are all where you can invest in order to generate income. Any other investments (without the goal of generating income) are patronage or charity. Investing is any type of investment that provides an opportunity to increase the invested amount in the short term (or long-term - it all depends on the strategy and needs of a single investor). It becomes clear that the tools for such a process can be very different - from banal speculation on the purchase / sale to financial participation in large projects for the construction or development of oil fields, which involve significant dividends subject to successful implementation. Naturally, in view of such a wide variety, there is a certain classification.
Types of Attachments
1) Real investment is an investment in production (industry, construction, agriculture). Also, some intangible assets (copyrights, patents) that can be used for production needs fall under this type.
2) Intelligent investment is an investment in retraining, education, science and so on. Also, certain intangible assets (copyrights, patents) that can be used for intellectual needs fall under this type.
3) Financial investment is the purchase of securities, the investment of funds against a deposit, etc.
The most common investment tools
In the economic literature you can find such investment methods:
1) deposit (bank deposit);
2) pension savings and insurance programs;
3) securities (bonds, stocks, options, vouchers and so on);
4) structured banking products ;
5) mutual funds (mutual investment funds);
6) stocks of various exchange funds;
7) investments in hedge funds;
8) investments in precious metals (silver, gold, platinum);
9) purchase or construction of real estate;
10) alternative types of investment - antiques, art, collecting, gems and more.
It is also necessary to understand that the “investment object” is all of the above (or something specific from the list). With the spread of the Internet, passive income has become available to the masses. Internet investing is the ability to use the world wide network to carry out transactions that are associated with all instruments through Internet banking (currency exchange, depositing money, buying shares or stocks, and so on). If you have a large start-up capital, you can start developing an online business. It is necessary to clarify that from all of the above, real investment is the type of investment that requires the maximum amount of funds and often huge capital injections, which is why it is much less accessible.
The risks
Investing is always a risk. Any instrument is characterized primarily by this indicator, as well as its profitability. Three types of attachments can be distinguished:
- low risk;
- medium risk;
- high-risk.
There is a connection between the degree of risk and profitability: the higher the probable profit, the riskier the investment. It is the ratio of these two criteria that determines the investment strategy. It is worth considering all types in more detail.
Low risk
Low-risk instruments provide virtually guaranteed returns. Interest is conditionally comparable to the yield on bank deposits. This group includes accumulative and insurance programs, government bonds and bills. It can be seen that the profitability of these instruments is practically guaranteed, and all invested capital can be fully returned back to the investor. The only risk is the failure of the state or the insurance company to fulfill its obligations.
Mid-risk
This category includes:
- deposits in commercial banks;
- bills and bonds of commercial banks;
- units of various funds (bond, real estate funds);
- rental of real estate.
Instruments in this group carry certain risks (up to fifty percent), and in some cases can even reach the complete loss of all capital. Typically, such tremendous economic stresses provoke global crises.
High risk
Here the yield is already virtually unlimited and can reach stunning interest. This type includes stocks, own business, trading in commodities and currency, shares of index funds and equity funds. This kind of investment is always a serious risk, but also a big profit. In large portfolios, the share of such instruments usually does not exceed 1-15%. A high-risk investment object is a casino where luck often plays a very large role, since mathematical calculations depend too much on the mass of probabilities.
Investment process
The investment process is a set of directed movements of different financial flows, various levels and forms. There are a number of conditions for this: the availability of sufficient resource potential that can ensure progress on the necessary scale of economic entities. In this mechanism, an investment object is what investment resources are transformed into. Such a process is a set of actions aimed at attracting the accumulations of individuals and legal entities for their use through the conversion of working and fixed assets for a certain profit. Only two parties are involved in this: the applicant company and the investor directly.
Investment process management
For this, it is necessary to monitor the economic climate of a particular region and enterprises; evaluate the investment climate of economic sectors and industries; to develop investment strategies for enterprises; carry out economic and financial regulation of the market and exchanges; evaluate the impact of investment flow on the enterprise. Real investment is the most labor-intensive process, therefore, there are such stages and points of the investment process as:
- motivation for investing;
- the presence of a development program and justification of goals;
- development of a strategy and investment plan;
- the availability of stable financial security;
- insurance;
- providing the real investment sector with all necessary technical and material resources;
-regulation and monitoring of the investment process;
-assessment of the results and further planning.
Financial asset
Investing is a combination of different types of investments. Financial assets are one of the most affordable today. A bank deposit is a savings and investment activity, and also has minimal risk. However, inflation has an extremely negative impact on such investments. And this means that a bank deposit is not even a medium-income instrument, and its whole essence boils down to saving funds. The remaining financial assets do not have guarantees, therefore, their assessment is much more complicated and complex, as it requires a fairly deep knowledge in one or another field.
Money
“Material” capital investment is an investment in precious metals and other types. Naturally, the yield here is significantly higher than that of deposits. Over the past decades, gold has fallen and has grown significantly in price, but its growth has been very unstable. You can invest in precious metals through futures contracts, metal accounts and more. It also includes real estate.
Currency and stock market
The main advantages of these types of investments are the ability to make investments with minimal amounts, the ability to actually instantly deposit and withdraw funds. The main disadvantage is the highest risk of losing part or all of the invested funds. This is especially “sinned” by the Forex market, which is not regulated at the legislative level, and brokers prefer to register exclusively in offshore.